TREASURIES-U.S. bond yields rise ahead of supply

Reuters Staff

5 Min Read

* U.S. to sell $62 billion in bonds at quarterly refunding
* Macron's French presidential win pares bonds' safe-haven
appeal
* Fed's Bullard sees little need for Fed to hike rates
further
* Fed's Mester sees need for more rate increases as economy
grows
By Richard Leong
NEW YORK, May 8 (Reuters) - U.S. Treasury yields rose on
Monday in advance of $62 billion in bond supply at this week's
quarterly refunding and following centrist Emmanuel Macron's
victory in the French presidential run-off on Sunday.
Macron's win revived appetite for stocks, propelling the S&P
500 and Nasdaq to record highs, and reduced safe-haven demand
for bonds. Some traders heading into Sunday's vote had feared a
possible upset by his anti-European Union rival Marine Le Pen.
With the closely watched French election in the rear view,
this week's domestic data and demand at the quarterly refunding
will determine the near-term direction on bond yields, analysts
said.
"It's a fairly heavy week with data and supply," said Ellis
Phifer, senior market strategist at Raymond James at Memphis,
Tennessee.
The week's key reports will be those on producer and
consumer prices as well as retail sales later this week,
analysts said.
The Treasury Department will kick off its latest refunding,
where it will repay $49.7 billion to investors on maturing
bonds, on Tuesday with a $24 billion sale of three-year notes
.
It will sell $23 billion in 10-year Treasuries
on Wednesday and $15 billion in 30-year bonds
on Thursday.
In early Monday trading, the benchmark 10-year note yield
was up more than 2 basis points at 2.378 percent but
short of the near four-week high set on Friday following a solid
U.S. payrolls report for April.
The yield on 30-year bonds was more than 2 basis
points higher at 3.016 percent, while the two-year yield
was up 1.6 basis points at 1.334 percent.
Possible demand for this week's Treasury supply was based
partly on investors' perception on further rate increases from
the Federal Reserve, analysts said.
Interest rate futures implied traders saw an 88 percent
chance the central bank would raise rates by a quarter point to
1.00-1.25 percent at its June 13-14 policy meeting, up
from 79 percent late on Friday, CME Group's FedWatch program
showed.
Earlier on Monday, St. Louis Fed President James Bullard
said strong bond demand and sluggish workforce growth would keep
a lid on rates in the forseeable future, which would allow the
Fed to keep rates at current levels.
At a separate event, Cleveland Fed chief Loretta Mester said
further rate increases are warranted as the economy has reached
the Fed's employment goal and is closing in on its 2 percent
inflation target.
May 8 Monday 10:39AM New York / 1439 GMT
Price
US T BONDS JUN7 151-6/32 -0-20/32
10YR TNotes JUN7 125-16/256 -0-40/25
6
Price Current Net
Yield % Change
(bps)
Three-month bills 0.8925 0.9068 0.015
Six-month bills 1.0025 1.0215 0.005
Two-year note 99-214/256 1.3344 0.016
Three-year note 99-234/256 1.5299 0.022
Five-year note 99-222/256 1.9031 0.020
Seven-year note 98-204/256 2.1869 0.022
10-year note 98-228/256 2.3777 0.026
30-year bond 99-176/256 3.0158 0.027
DOLLAR SWAP SPREADS
Last (bps) Net
Change
(bps)
U.S. 2-year dollar swap 28.50 -0.75
spread
U.S. 3-year dollar swap 24.75 -1.25
spread
U.S. 5-year dollar swap 9.25 0.00
spread
U.S. 10-year dollar swap -6.25 0.00
spread
U.S. 30-year dollar swap -45.25 0.25
spread
(Reporting by Richard Leong; Editing by Meredith Mazzilli)